Target for 2010

The market starts the trading day in 2010 with confidence and full of optimism. You guys might have your personal target for Jakarta Composite Index (JCI) this year. (Please join the poll at the bottom of my blog). Me personally, set 2950 – 3000 as the target for this year or around 15% - 20% return for full year 2010.

The commodity sector I believe would be the main index mover at the beginning of the year, with BUMI as my favorite stock in this sector. I set the TP for BUMI at 4000. The plan to double its production in 2012 would be the main factor to the price movement.

The other stock that I like from Bakrie group is ELTY. The Book Value of ELTY today is around 213. If ELTY could grow about 20% this year, its book value is expected to be at 250. With P/BV ratio of 2, I am expecting ELTY to reach 500 at the end of 2010 or more than 100% gain.

I also still like cement sector with SMGR as my top pick. I am expecting SMGR to grow 20% - 30% this year. With this projection of growth, I am expecting SMGR to reach 9000 – 10000 level this year. Since 2005, SMGR has been successful in growing its book value 20% every year. Hence, I believe it is not a difficult task for SMGR to repeat its growth story.

In banking sector, I would overweight BBRI. I am expecting BBRI to grow 15% - 25% this year. The yoy inflation rate in December 2009 at 2.78% is very likely to boost the credit consumption. The TP that I set for BBRI is at 9200.

Here is the summary of the target price of the index and some stocks that I picked:

	Price 2009	Target Price	Potential Gain
JCI	2534	3000	18.39%
BUMI	2425	4000	64.95%
ELTY	193	500	159.07%
SMGR	7550	10000	32.45%
BBRI	7650	9200	20.26%

Cement Industry Analysis

I would show you guys the cement industry players data. Cement is a very prospective sector in Indonesia. There are three major players which are Semen Gresik (SMGR), Indocement (INTP), and Holcim (SMCB). I would start it with trend analysis.

Trend Analysis
The economic crisis is influencing this sector growth as well as other sectors, even though the effect is not that bad. I predicted that in 2010 the industry will grow faster than today.

SMGR is leading the industry with market share 48.61% followed by INTP and SMCB with 34.45% and 16.94% respectively. Table below is the detail:

	2Q-2009	2008	2007	2006	2005
Indocement	34.45%	36.50%	35.42%	35.05%	34.64%
Holcim	16.94%	17.93%	18.16%	16.59%	18.69%
Gresik	48.61%	45.57%	46.43%	48.37%	46.66%
Total	100.00%	100.00%	100.00%	100.00%	100.00%

Company Data

INDOCEMENT (INTP)	2Q-2009	2008	2007
Total Asset (Mio IDR)	11,262,900.00	11,286,700.00	10,037,900.00
Book Value (Mio IDR)	9,118,740.00	8,500,190.00	6,893,500.00
Net Cash Flow (Mio IDR)	346,670.00	482,382.00	264,372.00
CAPEX (Mio IDR)	-57,299.00	-233,286.00	250,110.00
Sales (Mio IDR)	4,795,490.00	9,780,500.00	7,323,640.00
Operating Income	1,628,441.00	2,459,870.00	1,593,420.00
Net Income	1,172,471.60	1,745,500.00	980,103.00
Dividend	552,184.80	147,249.00	110,437.00
Total Share	3,681.23	3,681.23	3,681.23
Profitability
ROE	12.86%	20.53%	14.22%
ROA	10.41%	15.47%	9.76%
Operating Profit Margin	33.96%	25.15%	21.76%
Net Profit Margin	24.45%	17.85%	13.38%
Financial Risk
Debt / Equity	23.51%	32.78%	45.61%
Valuation
BV per share	2477.09	2309.06	1872.61
EPS	318.50	474.16	266.24
Sales per share	1302.69	2656.86	1989.45
Cash Flow per share	94.17	131.04	71.82
DPS	150.00	40.00	30.00

HOLCIM (SMCB)	2Q-2009	2008	2007
Total Asset (Mio IDR)	7,121,705.00	7,674,980.00	7,208,250.00
Book Value (Mio IDR)	2,817,925.00	2,537,926.00	2,257,357.00
Net Cash Flow (Mio IDR)	-308,086.00	171,068.00	394,510.00
CAPEX (Mio IDR)	-33,859.00	-176,723.00	-165,810.00
Sales (Mio IDR)	2,357,731.00	4,803,377.00	3,754,906.00
Operating Income	497,876.00	926,277.00	536,260.00
Net Income	279,999.00	282,220.00	169,410.00
Dividend	0.00	0.00	0.00
Total Share	7,662.90	7,662.90	7,662.90
Profitability
ROE	9.94%	11.12%	7.50%
ROA	3.93%	3.68%	2.35%
Operating Profit Margin	21.12%	19.28%	14.28%
Net Profit Margin	11.88%	5.88%	4.51%
Financial Risk
Debt / Equity	152.73%	202.41%	219.32%
Valuation
BV per share	367.74	331.20	294.58
EPS	36.54	36.83	22.11
Sales per share	307.68	626.84	490.01
Cash Flow per share	-40.20	22.32	51.48
DPS	0	0	0

SEMEN GRESIK (SMGR)	2Q-2009	2008	2007
Total Asset (Mio IDR)	11,991,449.00	10,602,964.00	8,515,227.00
Book Value (Mio IDR)	8,317,759.50	8,069,586.00	6,627,262.50
Net Cash Flow (Mio IDR)	229,750.00	924,404.00	1,078,690.00
CAPEX (Mio IDR)	-385,739.80	-561,764.00	-322,645.00
Sales (Mio IDR)	6,767,275.80	12,209,846.00	9,600,801.00
Operating Income	1,914,283.70	3,387,185.80	2,396,848.20
Net Income	1,513,599.90	2,523,544.50	1,775,408.40
Dividend	1,261,764.00	887,711.30	647,760.20
Total Share	5,863.58	5,922.18	5,931.52
Profitability
ROE	18.20%	31.27%	26.79%
ROA	12.62%	23.80%	20.85%
Operating Profit Margin	28.29%	27.74%	24.97%
Net Profit Margin	22.37%	20.67%	18.49%
Financial Risk
Debt / Equity	44.17%	31.39%	28.49%
Valuation
BV per share	1418.55	1362.60	1117.30
EPS	258.14	426.12	299.32
Sales per share	1154.12	2061.71	1618.61
Cash Flow per share	39.18	156.09	181.86
DPS	215.19	149.90	109.21

From the data above, I prefer to invest in SMGR and INTP since both companies obviously could make some significant profit. SMGR’s ROE are always grows, in 2007 it was 24.97%, in 2008 was 31.27% and for 2Q-2009 its ROE was 18.2% or equal to 36.4% annually.

INTP also managed to grow its ROE which are 14.22% in 2007, 20.53% in 2008 and 12.86% in 2Q 2009 (or equal to 25% annually).

INTP is preferable if we look at the Debt to Equity ratio, which continually decreased. SMGR growth in Debt / Equity might be due to its expansionary plan in the future, which is going to build some new plants.


Valuation

Based on the data, here is the projected EPS and current Book Value per share:

Forecasted next year EPS
SMGR	567.9
INTP	727.76
SMCB	46.94

Current BV per share
SMGR	1418.55
INTP	2477.09
SMCB	367.73

with today 20 August 2009 closing price, here is the ratio:

Ratio	P / BV	Forward P / E
SMGR	4.16	10.39
INTP	3.88	13.19
SMCB	3.59	28.12

I think the SMGR and INTP are still very undervalue given their strong future growth. I believe PE ratio for SMGR should be around 12x and INTP around 15x.